Bank-owned super funds the biggest losers

Date: January 9 2013

Clancy Yeates

Retirement funds for government workers posted the best returns in the latest financial year, while super funds owned by banks and wealth managers lost money in the 12 months to June, official figures show.

The nation's $1.4 trillion superannuation sector made average returns of just 0.5 per cent in the year to June 2012, the Australian Prudential Regulation Authority said on Wednesday.

Over the year, public sector funds were the top performers, with average rates of return of 1.7 per cent.

In-house corporate funds returned 1 per cent and union-linked industry funds made 0.9 per cent. For-profit retail funds – which tend to invest more heavily in shares – lost 0.6 per cent on their investments over the year.

Over the 10 years to June, super funds have returned an average of 4.4 per cent a year, with public funds again the best performers, followed by industry funds, corporate funds and retail funds.

Despite the weakness in fund performance last financial year, inflows into superannuation have continued to grow steadily, with some $49.6 billion poured into the sector during the 12 months to June.

From July this year, compulsory contributions to the sector are set to start rising by a greater rate, as the share of wages employers must put in super is increased from 9 per cent to 9.25 per cent.

The official figures highlight the hefty toll weak market conditions took on retirement savings last financial year, although a bounce in markets late in 2012 has seen balances improve substantially.

According to latest private sector estimates, the typical fund delivered double-digit returns over the 2012 calendar year, thanks to a surge in markets late in the year.

More detailed figures on the 200 largest super funds in the country show the best performer over the past nine years has been the staff fund for Goldman Sachs employees, which returned 9 per cent a year.

The second best was the fund for staff fund at the Commonwealth Bank, which returned 7.8 per cent a year.